Correlation Between FormPipe Software and Softronic

Can any of the company-specific risk be diversified away by investing in both FormPipe Software and Softronic at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FormPipe Software and Softronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FormPipe Software AB and Softronic AB, you can compare the effects of market volatilities on FormPipe Software and Softronic and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FormPipe Software with a short position of Softronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormPipe Software and Softronic.

Diversification Opportunities for FormPipe Software and Softronic

0.43

Correlation Coefficient

FormPipe Software  Softronic

Very weak diversification

The 3 months correlation between FormPipe and Softronic is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FormPipe Software AB and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and FormPipe Software is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FormPipe Software AB are associated (or correlated) with Softronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softronic AB has no effect on the direction of FormPipe Software i.e., FormPipe Software and Softronic go up and down completely randomly.

Pair Corralation between FormPipe Software and Softronic

Assuming the 90 days trading horizon FormPipe Software AB is expected to generate 2.45 times more return on investment than Softronic. However, FormPipe Software is 2.45 times more volatile than Softronic AB. It trades about 0.0 of its potential returns per unit of risk. Softronic AB is currently generating about -0.05 per unit of risk. If you would invest  2,650  in FormPipe Software AB on December 1, 2024 and sell it today you would lose (80.00) from holding FormPipe Software AB or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FormPipe Software AB  vs.  Softronic AB

FormPipe Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days FormPipe Software AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FormPipe Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Softronic AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Softronic AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Softronic is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FormPipe Software and Softronic

The main advantage of trading using opposite FormPipe Software and Softronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormPipe Software position performs unexpectedly, Softronic can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Softronic will offset losses from the drop in Softronic's long position.

The idea behind FormPipe Software AB and Softronic AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.